With 2021 now just around the corner, thoughts naturally turn to what next year might bring. For existing investors, this could mean expanding your portfolio at a rapid rate to take advantage of new opportunities and positive buying conditions.
Meanwhile, for new investors – or those who have entered the market only recently – there may be a desire to grow your selection of homes quickly and at scale.
But how can this be achieved? According to leading UK property developer SevenCapital, the most daunting aspect for anyone with dreams of building a property empire is often knowing where to start.
There are taxes, regulations, stamp duty, landlord duties and a host of other things to bear in mind, on top of knowing what property to purchase, when and where.
But could it be easier than it sounds?
“Of course, nothing worthwhile comes easy, however if you’ve worked hard to earn enough to invest comfortably in your first property and you’re prepared to put in the time, research and effort over the long-term, that dream of owning your own empire may be much closer to becoming reality than you first realised,” Andy Foote, director at SevenCapital, comments.
He says SevenCapital works with landlords and investors from the UK and overseas every day, and as landlords and investors themselves, the team at the firm regularly share best practices and guides with its clients to help them reach their investment goals.
“When it comes to building a property portfolio – either as an existing investor who wants to scale up, or as a new investor, it’s often easier to digest by splitting the journey into stages. In this case, we call it the four S’s of building a property empire: START, SCALE, SUSTAIN, SELL,” Foote explains.
Below, he outlines what these steps involve.
START: the most important part of any journey is simply to start. It can be the most daunting stage – as doing something for the first time often is – particularly when it involves handing over a sizeable sum of money.
But this is the stage where you carry out your research and preparation into what and where your first property is going to be, what type of investor you are and what does and doesn’t work for you. It also includes preparing for things to go wrong so that if they do and you need to stump up an unexpected amount of cash (for example on maintenance costs in a rental property), you’re already covered.
SCALE: this stage is all about safety and is not a stage to rush through. Here is where you’ve established your first property investment and got it up and running and you’re ready to start to reinvest.
You should know by now what your strategy is for the next few stages and how you might diversify your portfolio to get to your goal number of properties. It is vital to have a goal to work towards otherwise you could easily follow a road to nowhere.
Again, though, research is key. And remember, don’t just look for the best deal at any given time – you need to make sure each property is right for you and fits into your long-term plan.
SUSTAIN: this stage is all about management to make your property investments work hard for you. How do you want to run and manage your properties? Do you want to take control personally? Or are you a hands-off investor, in which case you’ll want a management company to handle things day-to-day on your behalf – which, of course, means factoring in a fee.
This stage also includes a review of your finances – what loans you have in place, your income versus your outgoings. Doing a regular review of this can pay dividends. You want to make sure you’re getting the best rates and aren’t paying over the odds.
SELL: this final stage is very much dependent on your goals. Selling might not be part of your plan, but if it is then you want to make sure that your property’s value has reached a healthy return. Historically, holding and maintaining a property for between 15 to 20 years has seen its value double – which is why I always say it’s not about timing the market, but time in the market.
Foote says investors also need to consider the size of their portfolio at this point and the taxes involved in selling their properties. If not considered carefully, ‘these can come as a hefty blow to your profits’.
“This, of course, is always far easier to talk about than to do and if you have any doubts, or concerns, you should always seek professional advice, whether that be from a financial or legal perspective. However, the key is always in the planning,” Foote concludes.
For further tips and a case study from an investor who has been there and done it, SevenCapital has a free to download guide to ‘Building Your Property Empire’ to help get you started on your property investment journey.
This post has originally been featured in Property Investor Today.